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WEDNESDAY, NOVEMBER 27, 1974
IN THE FIRST YEAR UNDER THE NEW SYSTEM (1975/76), THE PROVISIONAL TAX FOR 1975/76 PAYABLE TOWARDS THE END OF THAT YEAR WILL BE CALCULATED ON ACTUAL PROFITS EARNED IN 1974/75, WITH THE FINAL TAX FOR 1975/76 BEING ASCERTAINED IN 1976/77 WHEN THE ACTUAL PROFITS ARE KNOWN.
+THE MAIN EFFECT OF THE NEW TAX SYSTEM,+ MR. HADDON-CAVE SAID, +WILL BE THAT, IN A SITUATION OF RISING PROFITS, THERE WILL BE A QUICKER FLOW OF REVENUE.
+ON THE OTHER HAND, A SITUATION OF DECLINING PROFITS WILL BE REFLECTED MORE QUICKLY BY A SMALLER YEARLY DEMAND ON BUSINESSES AND, WHERE THERE IS EVIDENCE THAT PROFITS IN A CURRENT YEAR ARE LIKELY TO BE LESS THAN 80 PER CENT OF PROFITS ON WHICH PROVISIONAL TAX HAS BEEN CALCULATED, PROVISIONAL TAX CAN BE ADJUSTED BY THE COMMISSIONER TO REFLECT THE DECLINE IN PROFITS.+
HE NOTED THAT UNDER THE PRESENT SYSTEM, AN ACTUAL LOSS HAD TO BE ESTABLISHED FOR THE PURPOSE OF AN OFFSET OF TAX BEFORE THE COMMISSIONER WOULD BE IN A POSITION TO RECOGNISE THAT A CASH FLOW PROBLEM HAD ARISEN. AS A RESULT OF A DECLINE IN PROFITS.
THE FINANCIAL SECRETARY SAID THE ADJUSTMENTS TO PROVISIONAL TAX WOULD BE GREATER WHERE THERE ARE LARGE FLUCTUATIONS OF PROFITS, BUT FOR A CONTINUING BUSINESS WITH A STEADY PROFIT RECORD THERE WOULD BE ONLY RELATIVELY MINOR ADJUSTMENTS.
COMMENTING ON THE TRANSITIONAL ARRANGEMENTS, MR. HADDON-CAVE NOTED THAT THE APPROACH WOULD BE SIMILAR TO THAT ADOPTED WHEN THE METHOD OF CALCULATING SALARIES ASSESSABLE TO TAX WAS CHANGED TO A CURRENT YEAR BASE IN APRIL LAST YEAR.
IN THE TRANSITIONAL YEAR 1974/75, THE FINAL TAX LIABILITY FOR THAT YEAR WILL BE CALCULATED ON THE BASIS OF EITHER THE ACTUAL PROFITS OF 1974/75 OR THE PROFITS OF 1973/74 WHICHEVER ARE THE GREATER. HE ADDED, HOWEVER, THAT AS 1973/74 PROFITS WAS GENERALLY A MORE PROFITABLE YEAR THAN 1974/75, IT WOULD BE THE 1973/74 PROFITS THAT WOULD BE USED AS A BASE.
HE ALSO POINTED OUT THAT SINCE, UNDER THE PRESENT SYSTEM, TAX FOR THE TRANSITIONAL YEAR 1974/75 WOULD ALREADY HAVE BEEN ASSESSED AND PAID BY REFERENCE TO THE LARGER 1973/74 PROFITS, THERE WOULD BE NO TRANSITIONAL ADJUSTMENT FOR MANY BUSINESSES.
THE FINANCIAL SECRETARY MADE IT CLEAR, THAT THE TRANSITIONAL ARRANGEMENTS WOULD NOT APPLY IN THE CASE OF CAPITAL EXPENDITURE. CAPITAL EXPENDITURE INCURRED IN THE DROPPED OUT YEAR, HE SAID, WOULD NOT QUALIFY FOR AN INITIAL ALLOWANCE BUT WOULD QUALIFY FOR ANNUAL ALLOWANCE.
/HE STRESSED